Medisys PLC - 15 Month Results
28 Januar 1999 - 11:37AM
UK Regulatory
RNS No 7875v
MEDISYS PLC
28th January 1999
Preliminary announcement of unaudited financial results for 15 month period
ended 30 September 1998
Strategic restructuring of operations into two operating divisions
Medisys PLC ("Medisys" or "the Company") announces its financial results for
the 15 month period ended 30 September 1998.
Highlights of Period:
- Successfully raised #15 million through convertible bond offering led by
Nomura International, with warrants attached that, if exercised, will
provide an additional #9 million on or prior to 28 September 2001
- As at the date of this press release, #1.9 million of the bonds have been
converted into ordinary shares. The conversion price is 18.5p per
ordinary share. The closing price of Medisys shares on the Alternative
Investment Market on 27 January 1999 was 21.5p
- Completed the acquisition of Lukens Medical Corporation
- Senior appointments made to the Medisys Board, Hypoguard and Lukens
management
- Strategic restructuring of operations into two operating divisions - the
diagnostics division and the medical safety and products division
- FDA approval for portable needle disposal system, NicSafe 2800
Commenting on the results, Bill Bruce, Chairman of Medisys, said:
"We are very pleased with the progress made during the period to create a
broadly based medical products company focused on the rapid on-site delivery
of healthcare solutions. The Lukens acquisition and integration of the Needle
Incinerator Company is proceeding according to plan and the fund raising,
completed in August 1998, has given us the platform from which to expand.
While the Company is still at an early stage in its development, we are
rapidly moving to strengthen the operating structure of Medisys.
"I would also like to take this opportunity to welcome the new senior
management to the Group at what is a very exciting time for the Company. We
are very pleased to have attracted a management team with the quality, depth
and operational experience required to take Medisys to the next stage of its
development as a significant and dynamic healthcare industry participant."
Enquiries:
Medisys PLC
Kurt Amundson, Tel: 0171 457 2345 (today)
President & Chief Operating Officer Thereafter: 001 650 327 7900
Michael Barry,
Chief Financial Officer
Gavin Anderson & Company Tel: 0171 457 2345
David Yates / Sophie Pender-Cudlip
Chairman's Review
Following the completion of its acquisition of Lukens Medical Corporation in
September 1998 and a strategic restructuring of operations, Medisys now
consists of two core operating divisions:
(i) Hypoguard - a diagnostics division; and
(ii) Lukens Medical - a medical supplies and safety division.
The Needle Incinerator Company is in the process of being integrated into
Lukens Medical.
Following a strategic review of the business, the Board made the decision to
discontinue the cancer research programme within Biocure as it is not
considered core to Medisys' strategy. It is intended that certain commercial
activities within Biocure, such as the licensing of assays, will continue
under the direction of Hypoguard's management. In addition, Medisys intends
to seek a partner to continue the cancer research endeavours of Biocure with a
view to Medisys retaining a residual interest.
During the year, a number of key senior appointments were made to both Medisys
and its operating divisions to further strengthen the management team. The
appointments to the Medisys Board and management include:
- Dr. Donald E. Panoz to the Medisys Board as a non-executive director.
Dr. Panoz was the founder and is the former Chairman and Chief Executive
Officer of Elan Corporation, plc
- Dr. David Wong as Chief Executive Officer of Medisys and member of the
Board. Dr. Wong has been closely associated with the Company in the
past, providing strategic planning to the Company through Pacific
Corporate Consultants
- Kurt E. Amundson as President and Chief Operating Officer of Medisys and
member of the Board. Mr. Amundson brings many years of experience in
healthcare companies having worked in operating and financial positions.
He is also a Certified Public Accountant. Mr. Amundson was previously
CFO of Metra Biosystems Inc., a NASDAQ quoted, specialist bone and joint
disease diagnostics company
- Michael Barry as Chief Financial Officer of Medisys and member of the
Board. Mr. Barry spent eight years with Elan Corporation as a senior
member of the management team in the role of Vice-President of Finance
and subsequently as head of Pharmaceutical Operations. Mr. Barry is a
Chartered Accountant
- Alan Dorling as Managing Director of Hypoguard. Mr. Dorling previously
ran a division of Wyeth-Ayerst with over #75 million in turnover making a
positive contribution to the net income of Wyeth-Ayerst. Mr. Dorling has
extensive experience in healthcare, having also worked for Lederle and
Roche Products in the UK
- Malcolm Luker, as Director of Business Development at Hypoguard. Dr.
Luker spent the last eight years with Genzyme Diagnostics serving in
marketing, sales and business development roles. He has a Ph.D. in
Genetics from the University of Edinburgh
- Harold Callicoat as Chief Executive Officer of Lukens Medical Inc,
effective 1 February 1999. Mr. Callicoat has over 20 years' marketing
and sales experience in the healthcare industry and was most recently
President and Chief Operating Officer of Winfield Medical, a privately
held medical company which increased its sales from $6 million to $35
million over 12 years under Mr Callicoat's management. Mr. Callicoat
previously worked a number of years at Baxter Healthcare in various
sales, marketing and corporate planning positions
Medisys' mission is to be a leading provider of diagnostic, medical and safety
products enabling the rapid on-site delivery of healthcare solutions. These
solutions include the use of medical diagnostics, the consumption of medical
supplies and the management of medical waste. We see an opportunity to build
a market-driven business by providing a range of products to the medical
market place where rapid on-site delivery of healthcare is essential, and
where the delivery of such products serves an unmet medical need.
We are continuing to evaluate opportunities for further company and product
acquisitions to complement the enlarged Group's product lines and to provide
growth. Each division will be managed as a stand-alone profit centre,
allowing for a high degree of product integration and management interaction
between divisions. This will facilitate the creation of comprehensive medical
solutions, providing a full range of products to meet medical needs and
utilising common distribution channels.
Hypoguard - Diagnostics Division
Hypoguard's strategy is to be a leading provider of rapid test diagnostic
solutions for healthcare management. We plan to exploit our strip
manufacturing and our technical and marketing expertise to develop a series of
alternative rapid test diagnostic products, while expanding our technology
platform to other product opportunities. Management continues to evaluate new
product licensing opportunities.
During the period under review, Hypoguard undertook a number of initiatives
that set the stage for the growth of the company including:
- the launch of the Petit Supreme Glucose Monitoring System in March 1998.
New meter placements have commenced and an increase in the strip business
has ensued. Recent approvals in Scandinavia and France should help
expand this business
- the launch of the Spectrum Visual System. This system enables the
measurement of glucose levels without the use of a meter. The Company is
currently selling the product and is seeking opportunities to franchise
the technology in certain geographic markets
- the technology platform has been expanded to include three core
technologies:
- the membrane technology currently used in the Supreme system;
- a Biosensor technology capable of testing for multiple analytes which
is currently being developed as a next generation glucose monitoring
system; and
- a binding technology which enables immunoassays to be measured on the
membrane technology.
- product development programmes are in process for these technologies and
the first products should come to market over the next two years
Lukens Medical - Medical Supplies and Safety Division
With the acquisition of Lukens Medical Corporation in September 1998, a host
of strategic organisational and structural initiatives have been put in
motion. Initiatives undertaken include the following:
- the Needle Incinerator Company (NIC) is currently in the final stages of
being integrated into Lukens Medical. This business has made
considerable progress with its portable needle incinerator system, the
NicSafe 2800, which gained regulatory approval from the FDA in August
1998. This system is expected to be launched on the market by the middle
of 1999. In addition, Becton Dickinson is making continuing progress
with the distribution of NicSafe 1800 in the Mexican marketplace and
Medisys has begun selling it into the US market. Management is
continuing to look at distribution opportunities in new markets such as
Japan, South Africa and the Middle East
- the marketing and sales organisation of Lukens has been restructured into
a safety products group and a medical surgical products group which
includes the traditional wound healing products
- a complete review of Lukens products and the markets in which they are
sold has been completed and decisions made on where to focus efforts. In
certain international suture markets, Lukens will no longer support the
suture business, as it was marginally profitable at best. This has
resulted in certain restructuring costs including inventory and asset
write-offs, but will position the company for future growth in other
markets
Financial Highlights
Key features of the results for the 15 month period to 30 September 1998 were
as follows:-
- Turnover for the period was #4.2 million
- Pre-tax loss for the period totalled #4.6 million
- Research and development costs expensed and amortised in the period
totalled #1.8 million
- NIC costs of approximately #750,000 were sustained which will not recur
in future as NIC is integrated into Lukens
- Costs of #800,000 for the period were incurred by the laboratory
operations of Biocure Ltd which were shut down in October
The financial accounts and results reflect the following:
- The #15 million Variable Rate Convertible Bond Issue managed by Nomura
International. The bonds were issued with attached warrants that, if
exercised, will provide an additional #9 million on or prior to 28
September 2001
- As at the date of this press release, #1.9 million of the bonds have been
converted into ordinary shares. The conversion price is 18.5p per
ordinary share. The closing price of Medisys shares on the Alternative
Investment Market on 27 January 1999 was 21.5p
- The consolidation of the balance sheet of Lukens Medical Corporation, the
acquisition of which was completed on 28 September. No trading results
for Lukens have been consolidated into the accounts
- The total write-off of goodwill arising from the Lukens acquisition in
the 30 September balance sheet
- The change in year end from 30 June to 30 September approved by
shareholders at the AGM of the Company in December 1998
Hypoguard
Significant expenditure on R&D is being undertaken by Hypoguard as the Group
pursues the development of its point-of-care technology platform and its
application to the development of significant new products targeted at
substantial markets.
NIC
The results announced include administration costs of #1.3 million associated
with a stand-alone infrastructure for NIC. Responsibility for the operations
of NIC has been transferred to Lukens which is providing the infrastructure
for the marketing of the NIC range. This enables the Group to generate cost
savings of approximately #750,000 per annum.
Biocure
The laboratory R&D operations of Biocure ceased in October 1998. This
activity cost the Group approximately #800,000 in the period under review,
expenditure which will not recur in the future. The future development of the
compounds developed at Biocure will take place only on the basis of
partnership participation of third parties in the funding of R&D costs.
Lukens
Medisys senior management has undertaken a thorough review of the business and
manufacturing practices and procedures of Lukens. As previously identified in
the due diligence process carried out prior to completion of the acquisition,
Lukens has product lines with high margins and significant growth potential
but also old and slow moving product and associated inventory which was being
held for distribution in lower margin product segments, particularly in the
international sutures market. This review has also brought to attention
production inefficiencies, and the opportunity for cost savings.
Following this review, the Board has re-focused Lukens on the higher
potential, higher margin business and, to that end, has made certain purchase
accounting fair value adjustments, including write-offs and reserves against
inventories of:
(i) $2.0 million which reflect current costs of production; and
(ii) $2.0 million against inventory in unattractive market segments.
In addition, a sutures joint venture arrangement in Brazil was shut down with
a consequent write-off against plant and inventory which had been contributed
to the joint venture of approximately $500,000.
These adjustments give rise to a total Lukens goodwill write-off of #10.66
million, which has been taken against reserves.
MEDISYS PLC
Unaudited Consolidated Profit & Loss Account
15 Months Ended Year Ended
#'000 30 September 30 June
1998 1997
Turnover
Existing operations 4,060 4,096
Acquisitions 184 -
_____ _____
4,244 4,096
_____ _____
Cost of sales
Normal
- existing operations 2,751 3,320
- acquisitions 93 -
Exceptional - 2,030
_____ _____
2,844 5,350
_____ _____
Gross profit / (loss) 1,400 (1,254)
Other operating income 853 504
Research and development:
expenditure in the period (1,006) (154)
amortisation of capitalised R&D (767)
Distribution costs (66) (35)
Selling, marketing &
administrative expenses (4,912) (1,604)
_____ _____
Operating profit / (loss) (4,498) (2,543)
Interest receivable 50 31
Interest payable and
similar charges (135) (178)
_____ _____
(Loss) on ordinary activities
before taxation (4,583) (2,690)
Taxation on loss on ordinary
activities - 108
______ _____
(Loss) for the financial
period (4,583) (2,582)
====== =====
(Loss) per ordinary share (p) (2.73p) (6.12p)
====== =====
MEDISYS PLC
Unaudited Consolidated Balance Sheet
#'000 As at As at
30 September 30 June
1998 1997
Fixed Assets
Intangible assets 327 608
Tangible assets 2,579 1,155
Investments 420 -
_____ _____
3,326 1,763
_____ _____
Current Assets
Stocks 1,484 522
Debtors 1,879 944
Cash at bank 7,593 2,730
_____ _____
10,956 4,196
_____ _____
Current liabilities
Creditors: amounts falling
due within one year (10,130) (3,506)
_____ _____
Net current assets 826 690
_____ _____
Total assets less current
liabilities 4,152 2,453
Creditors: amounts falling due
after more than one year (1,849) (365)
Convertible bonds due 2002 (13,961) -
_____ _____
Net assets / (liabilities) (11,658) 2,088
===== =====
Equity shareholders' funds before
goodwill write-off on acquisition (997) 2,088
Goodwill write-off on acquisition (10,661) -
_____ _____
Equity shareholders' funds after
goodwill write-off on acquisition (11,658) 2,088
====== =====
Notes:
1 The weighted average number of shares outstanding during the period under
review was 167,592,630.
2 No dividends are being proposed in respect of the period under review.
3 The report and accounts of the Company will be circulated to shareholders
not later than 31 March 1999.
END
FR MLGZMGRZLLMM
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